Fiduciary Role Attracts Investors, Say Advisers

Surveyed registered investment advisers (RIAs) said that the top reason investors choose to work with an independent RIA is because of the fiduciary responsibility that comes with the role.  

According to the TD Ameritrade Institutional Advisor Index Survey, the fact that RIAs are required as fiduciaries to offer advice that is in the best interest of clients is thought of by advisers to be the primary factor why investors choose to work with an RIA (29%). Personalized service and competitive fee structure offered at an RIA firm (21%) and dissatisfaction with full commission broker (19%) were other top reasons advisers say investors chose an RIA.

“The survey results support what we believe is a long term trend of investors gravitating to the fiduciary model. Over the past few years, we’ve seen RIAs benefit from money in motion due to disruption at traditional full-commission firms. And as the dust has settled, investors can see more clearly the potential benefits of hiring an RIA,” said Tom Bradley, president, TD Ameritrade Institutional. “Investors may increasingly seek the confidence that can come from working with independent RIAs who sit on the same side of the table and are required by law to put their clients’ interests first.”

The survey also found that market volatility, both in the U.S. and Europe, is concerning advisers as well as investors. The quarterly survey of 502 RIAs indicates many advisers are growing increasingly concerned about the macroeconomic environment and its impact on their businesses. More than half indicate they are pessimistic to very pessimistic about the outlook on the U.S. economy over the next three months, up from just 18% the previous quarter.

Nine in 10 RIAs report their total number of clients increased or remained steady over the past six months. The survey shows the majority of new RIA assets are coming from traditional full-commission firms (55%). RIAs surveyed show an average revenue growth rate of 18% and added clients at an average rate of 13% over the past six months. However, when asked about the current economic climate and its impact on their businesses over the next 12 months, growth (25%) and profitability (28%) were top concerns along with macroeconomic environment (36%) and regulatory changes (38%).

Eighty-five percent of RIAs surveyed say they avoided cost cutting over the past six months. However, fewer RIAs say they increased their budgets. Twenty-three percent of advisers reported an increase in spending, down from 34% the previous quarter. Advisers who increased their budgets increased spending an average of 23% and the majority chose to invest in technology and marketing. Advisers who decreased business spending trimmed an average of 19% of total expenses, mainly cutting travel and client appreciation and entertainment activities.

Additionally, job satisfaction remains high as 8 in 10 RIAs are somewhat to completely satisfied with their careers.